Air Canada (AC, Montréal Trudeau) and the Canadian government have agreed on a financial aid package that gives the flag carrier access to CAD5.9 billion Canadian dollars (USD4.7 billion) in exchange for compensating ticket holders and restoring suspended regional services.

The financial support takes the form of CAD4 billion (USD3.2billion) in repayable loans and a CAD500 million (USD398 million) equity investment that will give the Canadian government a 6% stake in the country's biggest airline, according to a statement issued by Deputy Prime Minister and Finance Minister Chrystia Freeland and Transport Minister Omar Alghabra.

The financial support is being provided under the Large Employer Emergency Financing Facility (LEEFF), through the Canada Enterprise Emergency Funding Corporation (CEEFC), which will provide the CAD4 billion in repayable loans and the equity investment in Air Canada in the form of newly-issued Class B Voting Shares at a 15% discount to their recent trading price. CEEFC will also receive warrants on Air Canada stock in an amount equal to 10% of the loan commitments.

In exchange, Air Canada has committed to providing customers with their refunds as soon as possible – beginning April 30, 2021, at the latest. CEEFC will provide additional loan financing of up to CAD1.4 billion (USD1.1 billion) for Air Canada to provide these refunds.

“Taxpayers aren’t footing the bill. This is a loan facility, and the government of Canada fully expects to be paid back,” Freeland said.

“We have agreed with Air Canada that refunds should be issued as soon as possible, beginning in the coming weeks and months,” said Alghabra, though Air Canada has up to seven years to draw on the low-interest loan.

According to the statement issued by the government, in order to receive the government support, Air Canada will ensure that:

  • Regional communities retain air connections to the rest of Canada through the restart of service at airports temporarily suspended by Air Canada;
  • Any customer of Air Canada who wants a refund will receive one for certain pandemic-related cancellations;
  • Airline jobs, pensions, and collective agreements are protected; and
  • Air Canada remains a customer of Canada’s aerospace sector. The financing agreement would allow Air Canada to continue to be a vital customer of the Canadian aerospace industry by completing its planned purchase of aircraft as set out in its business plan, which includes aircraft built in Canada, such as the Airbus A220.

For seven airports where Air Canada had permanently cancelled service, the airline would seek interline agreements. Service would resume by no later than June 1, 2021, at the following suspended airports based on public health advice:

The government said negotiations continued with other Canadian carriers on financial support and any agreement reached in those negotiations would include a requirement that those airlines also refund pandemic related-cancellations. In the event that an airline does not need liquidity support from the government, the government remained open to helping all airlines provide voucher refunds to their customers.

Both Goldy Hyder, Chief Executive Officer of the Business Council of Canada, and Canadian Labour Congress president Hassan Yussuff expressed approval of the rescue package, the Candian Press reports.

However, the Canadian Union of Public Employees, which represents 10,000 Air Canada flight attendants, decried the deal, saying it “betrays the government’s commitment to supporting airline workers affected by the pandemic”.

“We had a commitment from the Trudeau government that any relief money for the airline sector would flow directly to support workers, and that commitment is not reflected in this agreement,” CUPE president Mark Hancock said in a statement.

“This deal is exactly what we feared a deal cooked up behind closed doors would look like: it’s a year late, no transparency, and not nearly enough to support the thousands of flight attendants still reeling from the impacts of the pandemic.”

Air Canada’s passenger numbers declined 73% in 2020 following several years of record growth for the airline. During 2020, it reduced staff by more than 20,000, more than half of the pre-COVID total, then cut another 1,700 employees in January.

The airline collected CAD554 million (USD440 million) from the Canada Emergency Wage Subsidy in 2020 and said it would continue to access the programme in 2021. The company lost CAD4.6-billion (USD3.6 billion) in 2020, compared with a profit of CAD1.5 billion (USD1.1 billion) the year before.